KBRA Releases Research – NQM Redemption Momentum Builds as Execution Window Opens

NEW YORK--(BUSINESS WIRE)--KBRA releases research that examines the upcoming pipeline of non-qualified mortgage (NQM) transactions, which could provide a meaningful source of seasoned, performing, and at- or above-market rate collateral to an already active NQM market. The report also covers the issuers' recent success in capitalizing on securitizing called collateral, as well as securitization spreads, callable collateral weighted average coupons (WAC), and seasoned loan performance.

Key Takeaways

• Some issuers have started to realize these opportunities, with at least 12 standalone transactions, as of April 2026, totaling approximately $5.2 billion issued in 2025 and 2026 that have included loans from called securitizations.
• As of April 2026, VERUS has been the most active issuer of recycled collateral transactions, accounting for approximately $2.3 billion across five deals since 2025. OBX and GSMBS were the next most active, with each totaling about $0.9 billion across two deals. Q1 2026 represents the most active period to date for these transactions.
• Tight RMBS spreads serve as the foundational support for increased issuance in general, effectively lowering the bar for seasoned collateral to be a viable collateral source for securitization. Select transactions backed by called collateral have priced at spreads generally in line with the broader NQM first cash flow (FCF) transactions, indicating investor demand for, and acceptance of, pools with longer observed performance history.
• The collateral WAC in recently securitized called loan NQM has increased over the past two years, while the collateral WAC in unseasoned NQM over the same period has declined. The convergence of the two represents how issuers are increasingly viewing called collateral as a viable source of securitizable collateral.
• While certain vintages have performed better than others, delinquency (DQ) levels in NQM have generally been contained. This performance broadly supports the callability of many transactions that will become redeemable in the near term, as generally only performing collateral is included in the refinance transactions.
• KBRA observes that many 2021 and 2022 vintage transactions remain outstanding despite having already passed their optional redemption dates. These deals generally carry lower WACs, averaging approximately 5%, reducing issuers' incentives to exercise optional redemption in the current higher-rate environment. In contrast, 2023 and 2024 vintage deals with upcoming optional redemption dates in 2026 and 2027 have an average WAC of 7.6% versus 6.9% for recent NQM securitizations backed by newly originated loans.
• KBRA expects NQM redemption activity to increase as 2023 and 2024 vintage transactions reach optional redemption windows in 2026 and 2027. The 2026-2027 optional-redemption pipeline totals approximately $68.2 billion by original balance across 174 transactions, with roughly 29% of this balance from 2023 vintage deals and 68% from 2024 vintage transactions.

Click here to view the report.

Recent Publications

• Non-QM Redemption Backlog Builds
• KBRA Non-QM RMBS Default Study: A Decade of Insights
• KBRA Non-QM RMBS Default Study: Credit Attribute Insights

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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